Correlation Between Toho and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Toho and Norsk Hydro at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Toho and Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toho Co and Norsk Hydro ASA, you can compare the effects of market volatilities on Toho and Norsk Hydro and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Toho with a short position of Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toho and Norsk Hydro.
Diversification Opportunities for Toho and Norsk Hydro
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Toho and Norsk is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Toho Co and Norsk Hydro ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsk Hydro ASA and Toho is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Toho Co are associated (or correlated) with Norsk Hydro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsk Hydro ASA has no effect on the direction of Toho i.e., Toho and Norsk Hydro go up and down completely randomly.
Pair Corralation between Toho and Norsk Hydro
Assuming the 90 days horizon Toho Co is expected to generate 0.57 times more return on investment than Norsk Hydro. However, Toho Co is 1.77 times less risky than Norsk Hydro. It trades about 0.24 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about -0.06 per unit of risk. If you would invest 3,580 in Toho Co on September 20, 2024 and sell it today you would earn a total of 560.00 from holding Toho Co or generate 15.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toho Co vs. Norsk Hydro ASA
Performance |
| Timeline |
| Toho |
| Norsk Hydro ASA |
Toho and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toho and Norsk Hydro
The main advantage of trading using opposite Toho and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toho position performs unexpectedly, Norsk Hydro can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Norsk Hydro will offset losses from the drop in Norsk Hydro's long position.| Toho vs. Live Nation Entertainment | Toho vs. Superior Plus Corp | Toho vs. NMI Holdings | Toho vs. SIVERS SEMICONDUCTORS AB |
| Norsk Hydro vs. NORWEGIAN AIR SHUT | Norsk Hydro vs. Seven West Media | Norsk Hydro vs. DELTA AIR LINES | Norsk Hydro vs. Westinghouse Air Brake |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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